Tax treatment of carbon allowances discussion at Copenhagen COP15

09/12/2009 - In addition to the price of carbon allowances, tax implications of emission trading will affect business incentives to reduce emissions. This side event at the COP15 Copenhagen summit will look at how carbon allowances are treated by, for example, corporate income taxes and how carbon markets can integrate globally.

Emission trading aims at creating a uniform price of carbon emissions across sectors, sources etc. The tax treatment of carbon allowances is important because it could affect the net-of-tax carbon price and incentives to invest in abatement etc. faced by different emitters.

The biggest challenge for the tax treatment of carbon allowances may arise when carbon markets go across national borders and, hence, tax jurisdictions. The policy question is whether any adjustments are needed to pave the way for a well-integrated global carbon market.